Offshore Tax Informant Program

The Offshore Tax Informant Program

The Government of Canada is committed to protecting Canada's tax base and ensuring public confidence in the fairness and integrity of the tax system. Canadians are allowed to structure their tax affairs in such a way in order to reduce the amount of tax owing – Registered Retirement Savings Plans and Tax-Free Savings Accounts are two examples of legal, beneficial ways that Canadians can reduce their taxes owing.

Investments outside the country are not illegal. Canadians who invest outside the country are in compliance with Canada's tax laws as long as they report all of the income earned outside Canada.

However, the Government of Canada and Canadian tax administrators are concerned about international financial transactions and mechanisms to avoid or evade Canadian tax. When an individual or business does not fully comply with tax legislation, an unfair burden is placed on law-abiding taxpayers and businesses and the integrity of Canada's tax system is jeopardized.

Launched as part of the Canada Revenue Agency's (CRA) efforts to fight international tax evasion and aggressive tax avoidance, the new Offshore Tax Informant Program (OTIP) allows the CRA to make financial awards to individuals who provide information related to major international tax non-compliance that leads to the collection of taxes owing. The OTIP draws on international best practices from across the globe. A number of member countries of the Organisation for Economic Co-operation and Development (OECD) also provide rewards for information regarding taxpayer non-compliance. The United States Internal Revenue Service, for example, has a Whistleblower Office that rewards individuals who come forward with information on major cases of tax evasion. International tax non-compliance is a focus of all developed nations, particularly members of the G-20, and the CRA's actions to combat this non-compliance are part of this global effort.

Economic Action Plan 2013

New measures announced in Economic Action Plan 2013 provide the CRA with more tools to combat international tax evasion and aggressive tax avoidance. The OTIP is a key part of these enhanced efforts to ensure that law-abiding Canadians who play by the rules and pay the correct amount of taxes are not disadvantaged by those who seek to cheat the system.

Offering a reward for information about major cases of international tax non-compliance will  encourage those with information to come forward and discourage Canadians from breaking the law. The program is targeting serious offenders. The CRA will only offer an informant a contract leading to an award if the potential assessment of federal taxes, excluding interest and penalties, exceeds $100,000. The payment process begins once $100,000 of federal tax relating to the assessments has been collected, and all recourse rights associated with the assessments have expired.

Economic Action Plan 2013 announced four other measures that help the CRA to combat international tax evasion and aggressive tax avoidance, including:

  • requiring certain financial intermediaries including banks to report international electronic funds transfers of $10,000 or more to the CRA;
  • extending the normal reassessment period by three years for a taxpayer who has failed to report income from a specified foreign property on their annual income tax return and failed to properly file Form T1135, Foreign Income Verification Statement;
  • revising Form T1135 to provide more detailed information, including the names of specific foreign institutions and countries where offshore assets are located and the foreign income earned on those assets; and
  • streamlining the legal process for the CRA to obtain information concerning “unnamed persons” from third parties, such as banks.

Eligibility of informants under the OTIP

To be eligible under the OTIP, individuals must provide the CRA with specific and credible details of major international tax non-compliance that lead to additional taxes being assessed and collected. When program requirements are met, the CRA may enter into a contract with the individual that could lead to an award if the potential additional assessment of federal tax, excluding interest and penalties, is more than $100,000.

Any individual, no matter where they are in the world, is eligible to participate as an informant, subject to certain limitations.

For example, individuals who have been convicted of tax evasion concerning the information provided, or an offence listed under section 750 of the Criminal Code (for example, fraud against Her Majesty), are not eligible to participate in the program or enter into a contract under the program. This ensures that criminals do not use the program to profit from their crimes.

Employees of the CRA are not eligible to participate in the program. Current or former federal, provincial, or municipal employees, officials, representatives, or contractors who obtained information on international tax evasion and aggressive tax avoidance as part of their duties are not eligible to become informants under the program.

There are other limitations to eligibility as well. To find out who is eligible to participate, go to Eligibility for the Offshore Tax Informant Program for more information.

Confidentiality and disclosure of information

CRA's use of information and documents

The information provided by an informant is collected under the authority of the federal tax legislation, and is covered by the confidentiality provisions of that legislation, as well as by privacy laws that impose strict limits on what the CRA can disclose.

Regardless of whether the information provided ultimately results in a contract with the CRA or a payment under the program, the CRA can use the information that has been provided by an informant to carry out its mandate to ensure all taxpayers pay the correct amount of tax under the law.

Confidentiality of informants

As Canada's tax administrator, the CRA takes the protection of personal information seriously and is committed to protecting the identity of informants to the fullest extent possible as required by the law.

Under some circumstances, such as when the informant is an essential witness in a court proceeding, it may not be possible to pursue the examination or investigation without revealing the informant's identity. The CRA will advise the informant before it decides whether to proceed in such cases.

Disclosure of taxpayer information to the informant

Once a contract is signed and the information is provided to the CRA, the informant will only be told the status and disposition of their file -- the CRA will only be able to confirm with the informant whether their file is still active.  If the file has been closed, the CRA will confirm whether an amount is payable under the contract. All taxpayer information is covered by the confidentiality rules in federal tax legislation.

For more information, go to The Offshore Tax Informant Program: Confidentiality of Information.

Informant award process

The CRA encourages any individuals, no matter where they are in the world, to come forward if they have information about major international tax non-compliance.

The CRA has set up a confidential and easy process for disclosure through a dedicated North American toll-free number (1-855-345-9042) and a local number (613-960-4265) that can be reached from anywhere in the world. Collect calls will be accepted. This line is staffed by OTIP employees, and confidentiality of all calls received is assured. We strongly recommend that informants contact the OTIP line first before making a submission to the program – the initial call to discuss eligibility and the nature of the information that may be provided will be done on a no-names basis. Please see How to submit information to the Offshore Tax Informant Program for full details.

Process for evaluating an informant's submission

An OTIP analyst will consider the preliminary information provided by the informant, evaluate the merits of the case, and make a recommendation about inclusion in the program. If approved, the informant and the CRA will enter into a contract.

After the contract is signed, the information provided will be forwarded to the appropriate area for compliance action.

A payment can be denied and a contract can be terminated in certain situations, including where:

  • the CRA already received the information from another source;
  • an audit or criminal investigation is conducted, but leads to an assessment of federal tax relating to international tax non-compliance that is less than $100,000;
  • the taxpayer is successful in an administrative or judicial appeal resulting in an assessment of federal tax relating to international tax non-compliance that is less than $100,000; or,
  • a finding of liability is made and sustained, but less than $100,000 is collected because the taxpayer has no known assets that the CRA can use to settle the outstanding tax liability.

Duration of the process

It may take several years from the date of entering into a contract with the CRA until the additional federal tax is assessed, the taxpayer's appeal rights have expired, and the amount owing is collected. Provided all payment conditions are met, once $100,000 of federal tax has been collected, the CRA will begin the payment process. Partial payments to an informant may be made as additional funds relating to the informant's submission are collected.

For more information, go to The informant award process.

Determination of the payment

The OTIP will determine whether a payment will be made under the contract and what that amount will be.

If the information provided contributes to the collection of federal tax owing, the award amount will be between 5% and 15%, of the federal tax collected related to the international tax non-compliance (not including interest and penalties). See Payment criteria for more information on how the CRA will determine an informant's reward percentage.

No amount is payable to an informant if the informant has been convicted of tax evasion concerning the information provided. See Eligibility for the Offshore Tax Informant Program for more information on who is eligible to participate.

Tax treatment of awards

An award payment will be treated as taxable income to the informant in the year it is received.

Administration

Through Economic Action Plan 2013, the Government of Canada is investing $30 million over five years to combat international tax non-compliance. As part of this investment, the CRA has established the Offshore Compliance Division, which will consist of 70 employees who will lead the CRA's efforts in cracking down on international tax evasion and aggressive tax avoidance. The OTIP operates within the Offshore Compliance Division of the CRA's Compliance Programs Branch, and reports directly to the Assistant Commissioner, Compliance Programs Branch.

Reporting on results

The CRA will report to Canadians on results of the OTIP, including the number of submissions, amounts recovered, and amounts paid out to informants, through the Agency's Annual Report to Parliament.

Reporting other forms of tax evasion to the CRA

Tax evasion, in all its forms, is against the law. The CRA maintains an Informant Leads Program which coordinates all leads that the CRA receives from informants, other than those received by OTIP, to determine if there is non-compliance with tax legislation. The Informant Leads Program ensures that the information is reviewed and provided to the corresponding compliance program for appropriate enforcement action. The Informant Leads Program does not offer rewards for information received.

For more information, go to Informant Leads Program.

Correcting Your Tax Affairs Before the CRA Comes to You

Failure to report income from domestic or foreign sources is illegal, and Canadians should know that the CRA actively pursues cases of non-compliance. Tax evasion and aggressive tax avoidance can lead to significant taxes, interest, and penalties. Tax evasion can also lead to fines and/or jail time.

Canadians who wish to voluntarily correct their tax filings before the CRA launches any compliance action should consider the CRA's Voluntary Disclosures Program for more information.

The Voluntary Disclosures Program allows taxpayers to come forward and correct inaccurate or incomplete information or to disclose information that they have not reported during previous dealings with the CRA. Taxpayers may avoid being penalized or prosecuted if they make a valid disclosure.

A disclosure may be made for income tax and goods and services tax/harmonized sales tax (GST/HST) purposes, as well as for charges under the Softwood Lumber Products Export Charge Act, 2006, or the Air Travellers Security Charge Act.

This program may be for you if you have any unreported income from business, employment, pension, or property; unreported capital gains; misappropriated funds; unreported GST/HST; over-claimed input tax credits and expenses; or if you have not filed information returns.

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